Hong Kong's Balance of Payments and International Investment Position statistics for the fourth quarter of 2014 and the whole year of 2014

The Census and Statistics Department (C&SD) released today (March 23) the preliminaryBalance of Payments (BoP)andInternational Investment Position (IIP)statistics of Hong Kong for the fourth quarter of 2014 and the whole year of 2014. The preliminaryExternal Debt(ED) statistics of Hong Kong for the same period were also included in this release.

I.Balance of Payments

Hong Kong recorded aBoP surplusof $26.7 billion (as a ratio of 4.4% to GDP) in the fourth quarter of 2014, compared with a surplus of $68.0 billion (as a ratio of 11.7% to GDP) in the third quarter of 2014.Reserve assetscorrespondingly increased by the same amount ($26.7 billion) in the fourth quarter of 2014.

For 2014 as a whole, there was aBoP surplusof $139.1 billion (as a ratio of 6.2% to GDP), compared with a surplus of $57.9 billion (as a ratio of 2.7% to GDP) in 2013.

Current account

Thecurrent accountrecorded a surplus of $17.0 billion (as a ratio of 2.8% to GDP) in the fourth quarter of 2014, compared with a surplus of $28.1 billion (as a ratio of 4.8% to GDP) in the same quarter of 2013. On a year-on-year comparison, the decrease in thecurrent accountsurplus in the fourth quarter of 2014 was due to an increase in thegoodsdeficit, partly offset by an increase in theservicessurplus, an increase in the net inflow ofprimary income, and a decrease in the net outflow ofsecondary income.

Thegoodsdeficit increased to $45.6 billion in the fourth quarter of 2014, compared with the $31.5 billion in the same quarter of 2013. This was due to a larger increase in imports ofgoodsrelative to that in respect of exports of goods. Over the same period, theservicessurplus increased to $53.6 billion in the fourth quarter of 2014, compared with the $52.1 billion in the same quarter of 2013. This was due to a smaller decrease in exports ofservicesrelative to that in respect of imports of services. The overall balance ongoodsand services recorded a surplus of $8.0 billion in the fourth quarter of 2014, compared with a surplus of $20.6 billion in the same quarter of 2013.

Theprimary incomeinflow and outflow amounted to $308.6 billion and $294.6 billion respectively, thus yielding a net inflow of $14.0 billion in the fourth quarter of 2014, compared with a net inflow of $12.6 billion in the same quarter of 2013.

Thesecondary incomeinflow and outflow amounted to $2.1 billion and $7.1 billion respectively, resulting in a net outflow of $4.9 billion in the fourth quarter of 2014, compared with a net outflow of $5.1 billion in the same quarter of 2013.

On a seasonally adjusted quarter-to-quarter comparison basis, thecurrent accountcredit in the fourth quarter of 2014 decreased by 0.2% from the third quarter of 2014, whereas thecurrent accountdebit increased by 0.7% during the same period.

For 2014 as a whole, thecurrent accountsurplus was $43.7 billion (as a ratio of 1.9% to GDP), greater than that of $32.2 billion (as a ratio of 1.5% to GDP) in 2013. The increase in thecurrent accountsurplus in 2014 was due to an increase in theservicessurplus from $229.1 billion to $235.2 billion, an increase in the net inflow ofprimary incomefrom $40.5 billion to $60.8 billion, and a decrease in the net outflow ofsecondary incomefrom $20.9 billion to $19.6 billion, partly offset by an increase in thegoodsdeficit from $216.6 billion in 2013 to $232.7 billion in 2014.

Capital and financial account

In the fourth quarter of 2014, a net outflow of $0.5 billion was recorded in thecapital account, compared with a small net outflow of less than $0.1 billion in the third quarter of 2014.

An overallnet outflow of financial non-reserve assetsamounting to $18.2 billion (as a ratio of 3.0% to GDP) was recorded in the fourth quarter of 2014, compared with an overall net outflow of $1.0 billion (as a ratio of 0.2% to GDP) in the third quarter of 2014. The overall net outflow recorded in the fourth quarter of 2014 was the result of a net outflow ofdirect investmentand a net outflow ofportfolio investment, partly offset by a net inflow due to the cash settlement offinancial derivatives, and a net inflow ofother investment.

Direct investmentrecorded a net outflow of $76.3 billion in the fourth quarter of 2014, compared with a net outflow of $230.3 billion in the third quarter of 2014.Portfolio investmentrecorded a net outflow of $23.3 billion in the fourth quarter of 2014, as against a net inflow of $245.4 billion in the third quarter of 2014.Financial derivativesrecorded a net inflow of $49.5 billion in the fourth quarter of 2014, compared with a net inflow of $12.6 billion in the third quarter of 2014.Other investmentrecorded a net inflow of $32.0 billion in the fourth quarter of 2014, as against a net outflow of $28.8 billion in the third quarter of 2014.

In the fourth quarter of 2014,reserve assetsincreased by $26.7 billion, compared with an increase of $68.0 billion in the third quarter of 2014.

For 2014 as a whole, a net outflow of $0.8 billion was recorded in thecapital account, compared with a net outflow of $1.6 billion in 2013.

An overallnet inflow of financial non-reserve assetsamounting to $43.4 billion (as a ratio of 1.9% to GDP) was recorded in 2014, as against an overall net outflow of $26.8 billion (as a ratio of 1.3% to GDP) in 2013. The overall net inflow recorded in 2014 was the result of a net inflow ofportfolio investment, a net inflow due to the cash settlement offinancial derivatives, and a net inflow ofother investment, partly offset by a net outflow ofdirect investment.

Direct investmentrecorded a net outflow of $305.9 billion in 2014, compared with a net outflow of $50.3 billion in 2013.Portfolio investmentrecorded a net inflow of $157.1 billion in 2014, as against a net outflow of $386.1 billion in 2013.Financial derivativesrecorded a net inflow of $103.9 billion in 2014, compared with a net inflow of $54.7 billion in 2013.Other investmentrecorded a net inflow of $88.2 billion in 2014, compared with a net inflow of $354.9 billion in 2013.

In 2014,reserve assetsincreased by $139.1 billion, compared with an increase of $57.9 billion in 2013.

II.International Investment Position

At the end of the fourth quarter of 2014, Hong Kong's external financial assets and liabilities amounted to $32,341.6 billion and $25,942.9 billion respectively. After netting out the external financial liabilities from the external financial assets, Hong Kong was a net creditor. Hong Kong's net external financial assets amounted to $6,398.8 billion (as a ratio of 285% to GDP) at the end of the fourth quarter of 2014, compared with $6,178.2 billion (as a ratio of 278% to GDP) at the end of the third quarter of 2014.

The ratios of both Hong Kong's external financial assets and liabilities to GDP at the end of the fourth quarter of 2014 remained at very high level, at 14.4 times and 11.6 times respectively, reflecting that Hong Kong is a highly externally oriented economy and also a major financial centre in the region with considerable cross-territory investment.

External financial assets

Within the total value of external financial assets at the end of the fourth quarter of 2014,direct investmentwas the largest component, accounting for 38.3% ($12,381.8 billion) of the total value.Portfolio investment($9,065.2 billion) andother investment($7,723.7 billion) contributed 28.0% and 23.9% respectively.

External financial liabilities

Within the total value of external financial liabilities at the end of the fourth quarter of 2014, 50.4% ($13,079.0 billion) was in the form ofdirect investment.Other investment($8,239.0 billion) andportfolio investment($4,060.7 billion) contributed 31.8% and 15.7% respectively.

III.External Debt

At the end of the fourth quarter of 2014, Hong Kong'sgross ED(measuring total outstanding gross external liabilities other than equity liabilities) amounted to $10,008.0 billion (as a ratio of 446% to GDP). Compared with $9,801.6 billion (as a ratio of 442% to GDP) at the end of the third quarter of 2014,gross EDincreased by $206.4 billion. This was mainly attributable to the increases in ED of other sectors and debt liabilities indirect investment(intercompany lending).

Sectoral analysis

At the end of the fourth quarter of 2014, a major proportion of Hong Kong's ED was attributable to the banking sector, accounting for 68.5% of the total. Other ED mainly consisted of ED of other sectors (16.5%) and debt liabilities indirect investment(intercompany lending) (14.8%).

ED of the banking sector decreased slightly from $6,864.6 billion at the end of the third quarter of 2014 (as a ratio of 309% to GDP) to $6,859.4 billion at the end of the fourth quarter of 2014 (as a ratio of 305% to GDP). ED attributable to other sectors, debt liabilities indirect investment(intercompany lending), the Government and the Hong Kong Monetary Authority amounted to $1,651.2 billion, $1,485.8 billion, $9.6 billion and $2.0 billion respectively at the end of the fourth quarter of 2014.

Further information

BoPis a statistical statement that systematically summarises, for a specific time period (typically a year or a quarter), the economic transactions of an economy with the rest of the world (i.e. between residents and non-residents).

IIPis a balance sheet showing the stock of external financial assets and liabilities of an economy at a particular time point. The difference between the external financial assets and liabilities is the netIIPof the economy, which represents either its net claim on or net liability to the rest of the world.

Gross ED, at a particular time point, is the outstanding amount of those actual current, and not contingent, liabilities that are owed to non-residents by residents of an economy and that require payment of principals and/or interests by the debtors at some time points in the future.

BoPandIIPstatistics of Hong Kong are compiled in accordance with international standards as stipulated in the Sixth Edition of theBalance of PaymentsandInternational Investment PositionManual released by the International Monetary Fund (IMF) in 2009. ED statistics of Hong Kong are compiled according to theExternal DebtStatistics: Guide for Compilers and Users published by the Inter-agency Task Force on Finance Statistics chaired by the IMF. Concepts inherent in these two international guidelines are harmonised with each other.

Statistics onBoP,IIPand ED for the fourth quarter of 2014 and the whole year of 2014 are only preliminary figures, and are subject to revision upon the availability of more data.

More details of the statistics ofBoP,IIPand ED, together with the conceptual and methodological details, are presented in the publicationBalance of Payments,International Investment PositionandExternal DebtStatistics of Hong Kong, Fourth Quarter 2014 published by the C&SD. Users can download this publication free of charge at the website of the C&SD (www.censtatd.gov.hk/hkstat/sub/sp260.jsp?productCode=B1040001).